The bull of all bulls isn’t done.
No one can stop an idea whose time has come; and that idea is Bitcoin. The Bitcoin revolution is delivering a derivative of truth to the masses.
For the first time ever, we have a moral money that is offering honorable time/energy distribution and conservation like never before seen. Bitcoin’s hard-coded, inelastic supply and decentralization of otherwise staked power (via Proof of Work) secures network participants’ wealth by optimizing purchasing power conservation; which inherently embodies time and energy.q
Most people who are unfamiliar with the emerging asset class, tend to try and justify not buying Bitcoin by reminding themselves of the asset’s “extreme” price volatility. This is a bad habit that even some newer Bitcoiners still run into.
In fact, there is an entire movement that has taken place in the Bitcoin community titled under the hashtag #GetOffZero, implying that people should, at the very least, buy a tiny bit of Bitcoin (a non-zero amount) to help secure themselves financially; even if they don’t think it will help yet!
Naturally, these large and living networks that grow exponentially do trade with significant price volatility in the short term, but undeniable long term triumph as seen in equity price action of the likes of Amazon, Google, etc. Still, Bitcoin’s network is multitudes more valuable and complex than any single tech company’s network and the market persistently attempts to realize this; hence the asset’s naturally higher volatility.
In this post, I will go over fundamental things going on today that make me extremely optimistic about Bitcoin’s future. These metrics/headlines/news pieces have been released left and right, and they come frequently. Simply following this space intensively for the past year alone has shown me the impressive level, or frequency, that Bitcoin lives on compared to other asset classes and traditional investment vehicles. The market pieces I describe below have all been updated or released recently, and I hope some of them provide refreshing perspective during these uncertain times.
- Long Term Price Trend. I wanted to start with this chart. Anyone can show you a weekly/monthly chart of Bitcoin and point out the price volatility and “uncertainty” that it indicates. However, with technical analysis, longer time frames usually depict more accurate and illustrative data. When we analyze Bitcoin’s growth since its inception, we can’t ignore the facts. Sometimes, asking simple questions can lead us to simple answers. Does this chart look bullish or bearish to you? Bitcoin is, after all, the greatest performing asset in history; and it’s a little over a decade old. Zoom out!
Bitcoin’s Annual Chart (each candle represents a year of BTC’s price change between 2010-2021)
- Success in El Salvador. The first domino has fallen. Sovereign nation states are already involved (and more will continue to be via Bitcoin game theory). El Salvador deemed Bitcoin legal tender and accelerated plans to mine Bitcoin via geothermal energy through an inactive volcano.
The crazy part is, this idea started in a Twitter Spaces live discussion where Nayib Bukele (El Salvador’s president) discussed the very real possibilities with well-known Bitcoiners in the space. Furthermore, Bukele declared plans to introduce a set of bills to provide the framework needed to release Bitcoin bonds. With the bond market being a $100-200 trillion market, companies like Blockstream are providing vital aid in the integration of Bitcoin as collateral and as an institutional-friendly, foundational layer of money. Bitcoin’s narrative as a safe-haven store of value will eventually eat away at a large portion of the bond market. Bitcoin Game Theory
Source: “The Bitcoin Dilemma”, Bitcoin Magazine
- Argentina Introduced to Bitcoin via Lightning Network. On January 11, 2022, CEO Jack Mallers of Strike declared launch in Argentina, a country that has been plagued by the consequences of inflation and monetary policy manipulation for the past century. Argentina is currently a cash heavy economy, and most Argentinians store their wealth in USD cash, since the Argentine peso has not acted as a safe haven store of value. Strike opening access to instantaneous, nearly free cross-border payments to the country through a cash-collateralized Bitcoin lightning rail is allowing Argentinians to utilize the Bitcoin network to excuse themselves of the cash-based economy that is depleting their wealth over time.
- Market Psychology. Bitcoin is trading around the $40,000 range with greed nearly absent compared to a year ago when Bitcoin sat at same price range, but contrastingly with a lot of greed. Market psychology is extremely fascinating to say the least, and seeing this data point was engaging for me. There is a famous quote that is well known by the investing world spoken by one of the greatest investors in the world, Warren Buffet. Buffet said, “Be fearful when others are greedy, and greedy when others are fearful.”
In my opinion, there is a lot more fear in the crypto markets at this moment, where most of retail now believes Bitcoin and crypto are doomed since we “crashed” back down to this range. This post by @Pastore1314 depicts the index sentiment shift:
- Bitcoin Investment Strategies. A study by “Wicked Smart Bitcoin” shows that dollar cost averaging (continually and incrementally buying) every single day rather than any other period remains the outperforming method to date. Simply put, you are earning more out of your investment in Bitcoin by buying some every day rather than trying to time the bottom all the time and buying in sporadic time periods! Just continue to consistently stack sats! (sats=satoshis, the smallest denomination of Bitcoin; 100 million satoshis= 1 bitcoin)
- Bullish On-Chain Analytic Metric. On-chain analytics are a fairly new, yet extremely insightful sector of digital asset analytics revolving around the data that can be extracted from the transparent Bitcoin blockchain. Some have claimed on-chain analytics to be the early macroeconomics of crypto; where true digital asset alpha, or market ‘edge’ can be found.
I’m not going to sit here and pretend I understand every on-chain metric, because I don’t (they are all extremely profound and most of the time they are validated through reasonable confluence with various other metrics). However, I thought this one deserved recognition, and I only hope that sending you (the reader) in the right direction if you are interested in learning more is the least I can do.
In short, Will Clemente is a 19 year old on-chain genius that works as a Lead Insights Analyst for Blockware Solutions, and a certain metric recently caught his eye. The metric that has been the talk of the inner Bitcoin hivemind lately is one created by David Puell (another venerable on-chain mastermind), called Dormancy Flow. Dormancy Flow “creates a ratio between Bitcoin’s market cap and the annualized dollar value of dormancy…essentially, the dollar total of all the coins spent in a given year. By creating a ratio between the market cap and the annualized dormancy value, you are in a sense, creating a ratio between the asset valuation and the spender motivation” (@TXMCtrades).
Entity-Adjusted Dormancy is a metric from Glassnode that algorithmically filters and refines data from economically meaningful investor wallets and their coin spending habits, or ‘hodling’ behavior (misnomer for ‘holding’ that stemmed from an early Bitcoin community forum and stuck). This metric seems to be indicating that price may have locally bottomed out, and now is perhaps a good time to buy Bitcoin. Hodlers are hodling!
Source: Will Clemente @WClementeIII
Here’s what David Puell had to say about his own Dormancy Flow metric that has been gaining popularity this week. Note that he does share the opinion that this current price dip is “a bullish, mid-to-high conviction signal”…but that the data “has to be analyzed in confluence with others.” Other on-chain metrics that Dormancy Flow can be studied alongside include other coin activity metrics like 90D Coin Days Destroyed and Hodler Net Position Change.
Nevertheless, the singular metric is essentially comparing price to spending behavior, and in the first tweet Will shared above, we see what Bitcoin’s price has historically looked like after each dormancy flow buy signal (as indicated by the blue rectangle slivers overlaid on Bitcoin’s price outline in black). Although the past is no indicator of the future and we should not hold this one metric as complete truth, the patterns and combined confluence can lead us to better probabilistic decision-making.
Source: David Puell @kenoshaking
All in all, I wrote this post to not only remind investors to lengthen their time horizons and lower their time preferences, but for new investors to also understand that the markets always reward virtue and deep truth in the long run. The fact of the matter is, Bitcoin is the most pristine asset the world has ever seen. Additionally, there are thousands of people working hard to seamlessly integrate Bitcoin into the financial system and world of implemented ideas that we know today (and that we will understand even better tomorrow). There are more people and companies devoting their lives to Bitcoin development. Others are helping to educate the masses on all that occurs with the asset and growing monetary network. Buying and hodling this single asset will most likely be the greatest decision most people make for their financial lives. There are many more who think these same thoughts. This rapidly-growing group of people is emerging by the day, and they all save their wealth in Bitcoin.
I firmly believe the Bitcoin Standard is upon us (whether it be across the next 5..10..20 years), because inviolable property has finally been discovered and the world’s financial system needs to heal from exorbitant printing and irrational decision making of the powerful few. Nature will always find its way back to restoration. With Bitcoin, righteous money finally exists. No longer can third party entities or the powerful few manipulate the money supply for their own gain (it eradicates the consequences of the Cantillon Effect). Bitcoin’s inelastic supply immunizes the network from power manipulation and human greed/immorality by simply disallowing the creation of any more Bitcoin via math and code. Retail investors, hedge funds, banks, pension funds, sovereign nation states; they all will want a piece of the scarce pie, and I only see that remaining true for 2022 and beyond.
In the meantime, I’m going to actively attempt to think in decades, not even years. I know this will not be an easy feat. Innovative disruption happens slowly, then suddenly. I hope to enjoy the crazy ride; Bitcoin isn’t referred to as “the bull of all bulls” for no reason! It is an accumulation game, after all. I was accumulating at the price of $7,500 per Bitcoin. I was accumulating more at $55,000 per Bitcoin. I wouldn’t count it out for these prices to end up being closer to rounding errors within the next decade or two.
“In a time of universal deceit – telling the truth is a revolutionary act.” -Unknown
Brian Feroldi (?,?) (@BrianFeroldi) / Twitter
The Bitcoin Dilemma -Bitcoin Magazine
The Philosophy of Bitcoin and How it Could Change the World As We Know It | Robert Breedlove
What is The Cantillon Effect: Economy Food Chain – Phemex Academy
Strike CEO Jack Mallers on Argentina Launch
El Salvador Inching Closer To Issue Bitcoin Bonds This Year
Simon Dixon, Max Keiser & Samson Mow Discuss El Salvador Bitcoin Volcano Bond
Alejandro ™? .DOT (@Pastore1314) / Twitter
What Is Proof-of-Work? – CoinDesk
What Is On-Chain Analysis? | iTrust Capital
David Puell (@kenoshaking) / Twitter
Will Clemente (@WClementeIII) | Twitter
Bitcoin: Entity-Adjusted Dormancy Flow – Glassnode Studio
Bitcoin Average Dormancy. New Views of a Classic On-Chain Metric | by David Puell | Medium
Extreme Leverage at Extreme Depths – Glassnode Bitcoin Onchain Analysis (Week 2, 2022)